Building Nevada - March 2002

Where Do We Grow From Here?

Nevada's Top Developers Offer Insights

by Stephanie Beck

Wherever you go these days, it seems you can’t escape the grumbling about a slowing economy. Even when the economy is advancing strongly, planners are continually looking for ways to entice new industry to Nevada, to provide not only economic diversity, but to increase jobs and opportunity. Commercial real estate developers are an essential key to helping accomplish that goal. Nevada Business Journal asked 16 of the state’s top developers how their plans are shaping up for the near future.

If the current economy has done anything for our developers, it is to inspire them to be more strategic about their property purchases and building plans, while waiting to find the right client for the right property. Though vacancies are expected to be up by the end of the year, this may be due in part to construction of new projects many developers are planning.

Who Answered Our Survey?

Developer	Largest Commercial Project	Size
Harsch Investment Properties	Speedway Industrial Park	1.4 million sq. ft.
Landwell	Valley Auto Mall	1 million sq. ft.
MagnuM Opus Corporation	MagnuM Distribution Center	346,000 sq. ft.
Montecito Companies	Montecito Town Center, Phase 1	361,000 sq. ft.
Newmark Merrill Companies	Horizon Town Center	331,000 sq. ft.
Paradise Development Ltd.	SunMark Plaza	500,000 sq. ft.
PD&C, LLC	Siena Office Park	335,000 sq. ft.
Prologis Trust	Prologis Park No. Las Vegas	1 million sq. ft.
R.L. Shaheen Co.	Parkway Professional Center	75,000 sq. ft.
RDS/Insight LLC	BrookHollow Business Park	100,000 sq. ft.
Stoltz Management	Hughes Airport Center	1.7 million sq. ft.
Tanamera Commercial Dev.	Reno Tahoe Tech Center	850,000 sq. ft.
Territory Incorporated	Centennial Center	900,000 sq. ft.
The Ribeiro Company	Quail Corners South I, II & III	240,000 sq. ft.
Trammell Crow Company	Southwest Commerce Center	1 million sq. ft.
Wade Development	Nevada Pacific Industrial Park	3.5 million sq. ft. at build-out

Six of the developers who answered our survey build more than one type of product – office, industrial, retail or multi-use/flex. This allows them to hedge their bets in case any one segment of the industry slows down. However, some specialize in a particular type of development. Four build only multi-use projects, two build only office, two specialize in retail projects such as shopping centers and another two concentrate on industrial developments.

We wanted to know who is leasing these commercial spaces, and whether the construction boom over the last few years was due to Nevada companies growing into larger spaces, or to an influx of firms moving here from out-of-state. The answer to both questions seems to be, "Yes."

We asked the developers to rate their relations with the local government entities they deal with in matters of permitting, zoning and other issues. Most seemed satisfied with the way they were treated by city and county officials and bureaucrats.

Cooperation:

1 = Easy to work with

2 = About average compared to other locales

3 = Difficult to work with

Speed:

1 = Quick in processing requests

2 = About average compared to other locales

3 = Slow in processing requests

The majority of Nevada’s top developers are focused on the future and several have 100 percent of their energies dedicated to building. In addition, many are balancing their building efforts with leasing properties already in existence. Responses show most developers are not anticipating a slow market, but rather business is proceeding as usual, if somewhat cautiously.

Question: What are your plans for the next 12 months?

Note: Some respondents checked more than one answer.

Concentrate solely on leasing the projects I already have 7

Building new projects 10

May build if the market improves 3

Question: What measures have you taken to minimize your risk in an uncertain economy?

The most common theme was to hold off on new projects until later in the year, while maximizing the potential of existing projects. In addition, some companies mentioned the importance of increasing sales training and adding new marketing staff. Several respondents indicated their priorities included a targeted strategy for building and renting. One developer mentioned his company "hasn’t experienced a slowdown." Other plans included the following:

Carefully evaluate the feasibility of proposed projects

Remodel existing available space

Offer flexibility with lease rates and tenant improvement allowances

We don’t buy overpriced land and we don’t overbuild.

Make sure we have significant pre-leasing and major anchor tenants in place

Focus on location, service and price

Look for more immediate and smaller development opportunities

Question: The biggest challenge I have in my development is:

Responses to this question were somewhat varied. Several indicated one of the greatest challenges was developing or waiting for the needed infrastructure to access properties. Most are also dealing with existing vacancies, while finding the right client for the right property. One developer noted the rising cost of electricity in Nevada is an added challenge when appealing to manufacturers looking to relocate, particularly those interested in moving from the East. Additional responses were as follows:

We want larger users and are willing to wait. This makes leasing a little more challenging because there are fewer users in this size range, and we have to be patient.

Finding and retaining new tenants

Dealing with bureaucratic red-tape, delays in processing and permitting

Scheduling and cost control

Finding affordable land to develop, building the right product and not overbuilding

Timely lease-up at acceptable rental rates

Expediting approvals for infrastructure and mapping

Question: The best feature of my development is:

The majority of responses from developers listed location and design as the main strengths for their properties, as well as factors that differentiated them from their competitors. Flexibility in parcel size was close behind. Another listed landscaping as a unique property characteristic. Other features were:

Flexibility - we can accommodate almost any size tenant

Pedestrian friendly

Strong locations that are well-anchored

Technologically advanced

Designed and built to the needs of the tenants

Timeless architectural design

Available contiguous space

Institutional-grade construction

Creativity in structuring deals in response to market conditions

If Nevada residents want a picture of what growth for the state looks like, start with these developers. Most of these companies are focused on growth and are not letting a questionable economy distract them from progressive business plans. The optimistic attitude of developers can serve as a positive sign of things to come in Nevada.